by Calculated Risk on 12/12/2019 10:03:00 AM

From CoreLogic: CoreLogic Reports 78,000 Single-Family Properties Regained Equity in the Third Quarter of 2019

CoreLogic® ... today released the Home Equity Report for the third quarter of 2019. The report shows that U.S. homeowners with mortgages (which account for roughly 64% of all properties) have seen their equity increase by 5.1% year over year, representing a gain of nearly $457 billion since the third quarter of 2018.
...
From the second quarter of 2019 to the third quarter of 2019, the total number of mortgaged homes in negative equity decreased by 4% to 2 million homes or 3.7% of all mortgaged properties. The number of mortgaged properties in negative equity during the third quarter of 2019 fell by 10%, or 220,000 homes, compared to the third quarter of 2018, when 2.2 million homes, or 4.1% of all mortgaged properties, were in negative equity.
...
“Ten years ago, during the depths of the Great Recession, more than 11 million homeowners had negative equity or 25% of mortgaged homes,” said Dr. Frank Nothaft, chief economist for CoreLogic. “After more than eight years of rising home prices and employment growth, underwater owners have been slashed to just 2 million, or less than 4% of mortgaged homes.”

Negative equity, often referred to as being underwater or upside down, applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in a home’s value, an increase in mortgage debt or both. Negative equity peaked at 26% of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis, which began in the third quarter of 2009.
emphasis added

Click on graph for larger image.

This graph from CoreLogic compares Q3 to Q2 equity distribution by LTV. There are still quite a few properties with LTV over 125%.

On a year-over-year basis, the number of homeowners with negative equity has declined from 2.2 million to 2.0 million.

by Calculated Risk on 12/12/2019 08:37:00 AM

The DOL reported:

In the week ending December 7, the advance figure for seasonally adjusted initial claims was 252,000, an increase of 49,000 from the previous week's unrevised level of 203,000. This is the highest level for initial claims since September 30, 2017 when it was 257,000. The 4-week moving average was 224,000, an increase of 6,250 from the previous week's unrevised average of 217,750.
emphasis added

The previous week was unrevised.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 224,000.

This was much higher than the consensus forecast.

by Calculated Risk on 12/11/2019 08:13:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 212,000 initial claims, up from 203,000 last week.

• Also at 8:30 AM, The Producer Price Index for November from the BLS. The consensus is for a 0.2% increase in PPI, and a 0.2% increase in core PPI.

• At 12:00 PM, Q3 Flow of Funds Accounts of the United States from the Federal Reserve.

by Calculated Risk on 12/11/2019 04:23:00 PM

From the HAR: The Houston Housing Market Chugs Confidently Along Through November

November marked the fifth consecutive positive month of home sales with continued low mortgage interest rates helping to keep the Houston real estate market on track for a record 2019. Single-family home sales across greater Houston totaled 6,395 in November, according to the latest monthly report from the Houston Association of REALTORS® (HAR). That is up 3.6 percent from one year earlier. On a year-to-date basis, home sales are running 4.1 percent ahead of 2018’s record volume.
...
Sales of all property types increased 2.1 percent in November, totaling 7,577 units. Total dollar volume rose 3.4 percent to $2.2 billion.
…
Total active listings, or the total number of available properties, rose 5.2 percent to 42,139. … Single-family homes months of inventory was flat for the first time in 2019, holding steady at a 3.8 months supply.

“The end of the year typically brings a slower pace of home sales, so we welcome another month of gains and attribute it to continued low interest rates in a market that has added more than 80,000 jobs over the past year, according to the Texas Workforce Commission,” said HAR Chair Shannon Cobb Evans with Better Homes and Gardens Real Estate Gary Greene.
emphasis added

Sales are on pace for a record year in Houston.

by Calculated Risk on 12/11/2019 02:10:00 PM

Statement here.

Fed Chair Powell press conference video here starting at 2:30 PM ET.

On the projections, growth was mostly unchanged, and unemployment and inflation were revised down slightly.

Q1 real GDP growth was at 3.1% annualized, Q2 at 2.0% and Q3 at 2.1%. Currently most analysts are projecting around 1% to 2% in Q4. So the GDP projections were little changed, although GDP for 2020 was revised up slightly.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2019	2020	2021	2022
Dec 2019	2.1 to 2.2	2.0 to 2.2	1.8 to 2.0	1.8 to 2.0
Sept 2019	2.1 to 2.3	1.8 to 2.1	1.8 to 2.0	NA

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 3.5% in November.  So the unemployment rate projection for Q4 2019 was revised down slightly.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2019	2020	2021	2022
Dec 2019	3.5 to 3.6	3.5 to 3.7	3.5 to 3.9	3.5 to 4.0
Sept 2019	3.6 to 3.7	3.6 to 3.8	3.6 to 3.9	NA

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of October 2019, PCE inflation was up 1.3% from October 2018 So PCE inflation projections were revised down slightly.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2019	2020	2021	2022
Dec 2019	1.4 to 1.5	1.8 to 1.9	2.0 to 2.1	2.0 to 2.2
Sept 2019	1.5 to 1.6	1.9 to 2.0	2.0	NA

PCE core inflation was up 1.6% in October year-over-year. So Core PCE inflation was revised down sligthly.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2019	2020	2021	2022
Dec 2019	1.6 to 1.7	1.9 to 2.0	2.0 to 2.1	2.0 to 2.2
Sept 2019	1.7 to 1.8	1.9 to 2.0	2.0	NA

by Calculated Risk on 12/11/2019 02:01:00 PM

FOMC Statement:

Information received since the Federal Open Market Committee met in October indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports remain weak. On a 12‑month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee decided to maintain the target range for the federal funds rate at 1‑1/2 to 1-3/4 percent. The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; Esther L. George; Randal K. Quarles; and Eric S. Rosengren.
emphasis added

by Calculated Risk on 12/11/2019 11:15:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.9% annualized rate) in November. The 16% trimmed-mean Consumer Price Index rose 0.3% (3.1% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.3% (3.1% annualized rate) in November. The CPI less food and energy rose 0.2% (2.8% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed released the median CPI details for November here.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.9%, the trimmed-mean CPI rose 2.4%, and the CPI less food and energy rose 2.3%. Core PCE is for October and increased 1.6% year-over-year.

On a monthly basis, median CPI was at 2.9% annualized and trimmed-mean CPI was at 3.1% annualized.

Overall, these measures are mostly above the Fed's 2% target (Core PCE is below 2%).

by Calculated Risk on 12/11/2019 08:34:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.3 percent in November on a seasonally adjusted basis, after rising 0.4 percent in October, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.1 percent before seasonal adjustment.
...
The index for all items less food and energy rose 0.2 percent in November, the same increase as in October.
...
The all items index increased 2.1 percent for the 12 months ending November, a larger rise than the 1.8-percent increase for the period ending October. The index for all items less food and energy rose 2.3 percent over the last 12 months. The food index rose 2.0 percent over the last l2 months, while the energy index declined 0.6 percent over the last year.
emphasis added

Core inflation was at expectations in November. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 12/11/2019 07:00:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 3.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 6, 2019. The results for the week ending November 29, 2019 included an adjustment for the Thanksgiving holiday.

... The Refinance Index increased 9 percent from the previous week and was 146 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 0.4 percent from one week earlier. The unadjusted Purchase Index increased 35 percent compared with the previous week and was 5 percent higher than the same week one year ago.
...
“Low mortgage rates continue to be the trend as 2019 comes to an end, and mortgage applications responded accordingly last week, rising 3.8 percent. The 30-year fixed mortgage rate remained under 4 percent for the fourth straight week, and rates for FHA loans declined close to their lowest level of the year. The decrease in FHA rates led to a 27 percent jump in refinance applications for those loans, and their share of refinance activity – at 14 percent – was the highest since 2016,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Purchase applications were down slightly, but were 5 percent higher than a year ago, which is in line with the gradual growth in the purchase market seen throughout this year.”

Added Kan, “The November jobs data showed increased payroll gains and low unemployment, which means conditions remain favorable for steady purchase growth in the coming months.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 3.98 percent from 3.97 percent, with points increasing to 0.33 from 0.32 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index since 1990.

With lower rates, we saw a sharp increase in refinance activity, but mortgage rates would have to decline further to see a huge refinance boom.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 5% year-over-year.

by Calculated Risk on 12/10/2019 07:46:00 PM

My FOMC Preview.

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, The Consumer Price Index for November from the BLS. The consensus is for a 0.2% increase in CPI, and a 0.2% increase in core CPI.

• At 2:00 PM, FOMC Meeting Announcement. No change to policy is expected at this meeting.

• At 2:00 PM, FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

• At 2:30 PM, Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.